CCF SA ADVOCACY
CCF SA MAGAZINE ISSUE 3 : 2019
“It is not just the amount of capital spend on infrastructure, but the way that the spending is distributed. There needs to be varying project sizes, not an aggregatation of projects into a much larger project package. The benefit to South Australia extends well beyond a project. The project in many respects is often the vehicle or mechanism to generate economic activity and jobs growth.”
S
outh Australia’s economy is driven by small businesses, with over 90% in the SME category. SMEs are collectively the largest employer in SA, and will be into the future. It is for that reason that the government acknowledged the need for improved communication between government purchasers and potential providers, active collaboration between businesses, review of current systems and removal of process barriers, in establishing the Industry Advocate.
CCF SA Members have expressed concern that over time, bundled projects will become beyond the reach of SME civil contractors, and sub-contractors will be beholden to a handful of large contractors for work. This creation of monopoly ownership of major civil infrastructure projects threatens the viability of local small and medium-sized civil contracting companies – that offer ongoing local employment opportunities – and undermines quality as it decreases open market competition.
The State can benefit from growing Australian companies by creating competition and more capability that is South-Australian controlled. Local companies need to be able to work on complex projects to develop world-class skills and remain competitive in the market.
SA Water has procurement arrangements that are largely directed at a few large contractors which have the benefit of long-term contracts. This work is either self-performed or sub-contracted to smaller subcontractors at the discretion of the head contractor. There is very little monitoring or auditing of these sub-contracting arrangements initiated by the head contractor. SA Water, as the major state owned water utility, is very well placed to have a highly targeted procurement program and we encouraged them to do so.
There needs to be active collaboration across State Government agencies, firms, and industries to ensure the objectives of local businesses winning State Government contracts are met. It is important that government procurement processes do not create unnecessary barriers that would deter SMEs from competing for contracts, tendering, or growing and gaining experience. The process for delivery needs to be simplified to make them more efficient, as many of the current requirements are unnecessary and actually go against what the government is trying to achieve (e.g. some safety documents actually make projects less safe as they can be too prescriptive and make people complacent and not think for themselves). Improved regulations for mandating local employment in projects is required. While what constitutes a ‘local company’ may be difficult to define, it needs to be better thought out because greater involvement of mid-tier construction companies leads to savings in public spending by fostering greater competition. CCF SA made several recommendations to the South Australian Parliamentary Inquiry into the State Procurement Board, that specifically dealt with procurement matters. Reforms must be streamlined and designed to be incorporated into existing procurement and industry participation policies, and utilise the efficient structure and capabilities of the Office of the Industry Advocate. The CCF SA also provided an extensive list of factors to be incorporated into a state government SME procurement policy to apply to all state government departments, public authorities and local councils. The Productivity Commission has undertaken an Inquiry into Government Procurement, and the findings from this should inform Infrastructure SA’s processes to deliver a more coherent and streamlined framework. Once procurement policy is established, compliance should be the primary responsibility of the procurement officer, the CEO, and the relevant Minister. The Office of the Industry Advocate should have the power and role to investigate issues raised by the industry in relation to the content and application of procurement policies.
Terms of tenders need to be improved to create a level playing field. Many small to medium businesses in the infrastructure sector are struggling to stay in business when sub-contracting. The terms of contracts need to be much more transparent to protect subcontractors, particularly in terms of timely payments, and distribution of risk. With the growing preference of the Government to package infrastructure jobs, the distribution of risk needs to be looked at much more closely and made transparent. Many SMEs feel that they are being put in a position of ‘gambling’ their futures because of high risk. Also, while smaller businesses bring in their IP to deliver projects, they do not get credited with the ‘runs on the board’ to win future projects. The Government needs to value the Intellectual Property of SMEs – they have significant local experience, and quality of personnel that has been built up. CCF SA recommended to the South Australian Parliamentary Inquiry into the State Procurement Board that “the State Government adopt a standard sub-contracting contract to be used by all Head Contractors undertaking government work using sub-contractors”. Such a document would ensure that subcontracting terms and conditions are common to all Head Contractors undertaking government projects, and that the terms and conditions of the sub-contract are regarded as fair and reasonable by the Government. For the resolution of difficulties between a sub-contractor and the head contractor, an avenue of direct communication between the sub-contractor and the client (Government) would be useful. CCF SA has developed a Charter of Corporate Behaviour that we encourage the larger contractors to use that would guide and govern the relationshsips with SME contractors down the supply chain, and minimise disputes.
It is not just the amount of capital spend on infrastructure, but the way that the spending is distributed. There needs to be varying project sizes, not an aggregatation of projects into a much larger project package. The benefit to South Australia extends well beyond a project. The project in many respects is often the vehicle or mechanism to generate economic activity and jobs growth.
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